What is the Supply Limit of Ethereum?
Unlike Bitcoin, which has a fixed supply limit of 21 million coins, Ethereum does not have a hard cap on its total supply. Initially, Ethereum utilized a capped issuance model, but this changed with the introduction of Ethereum Improvement Proposal (EIP) 1559 in August 2021.
Under the current model, Ethereum's supply is dynamic. Ethereum's network continuously issues Ether (ETH) as a reward for miners (or validators, in the case of Ethereum 2.0) for their contributions to network security and operations. This issuance reduces over time, which aims to simulate a more deflationary aspect as ETH is also burned through transaction fees. In the Ethereum ecosystem, transaction fees are partially burned, meaning a portion is permanently removed from circulation.
As of now, ETH inflation rate is approximately 0.5% to 1% annually, but future changes might further influence supply dynamics. Hence, the Ethereum model encourages both growth and sustainability without the rigid limitations seen in Bitcoin, making it unique in the cryptocurrency landscape.
In summary, Ethereum lacks a strict supply cap, with economic variables that influence its supply based on network activity and governance decisions. This flexibility aims to align with the network's evolving use cases, unlike Bitcoin's strictly fixed supply that aims to be a deflationary asset.